How insurance can narrow the valley of death [partner content]

Jamie Daggett started his career as a mechanical engineer working for cleantech startups in Silicon Valley. But after five startups and three buyouts, Daggett saw the same story repeat itself: good technologies that worked in the lab often died before reaching commercial scale. And often they didn’t fail because the science was wrong; they failed because investors couldn’t trust that the performance would hold up over time. That realization eventually led him to an unexpected place: insurance. Today, Daggett is the energy storage and fuel cell lead at Ariel Green, a Lloyd’s of London syndicate that provides a wide range of insurance for clean-energy projects. “Insurance is another tool that we can use to help grow the clean-energy market,” says Daggett. “I do feel like it plays an unsung role behind the scenes.” In this episode, produced in collaboration with Ariel Green, Daggett talks with Stephen Lacey about how insurance is helping the energy storage sector mature. They discuss how the bankruptcy of Powin Energy exposed the fragility of supplier warranties, what the Moss Landing fire revealed about chemistry and safety risk, and how new markets for long-duration and non-lithium storage are testing the boundaries of what can be insured. Daggett explains how technology performance insurance now allows lenders, developers, and manufacturers to move faster by transferring risk from young suppliers to a creditworthy insurer. This is a partner episode, produced in collaboration with Ariel Green. Ariel Green helps clients reduce uncertainty by providing investment-grade insurance for clean-energy projects — protecting the technologies that protect the environment. To learn more, visit arielgreen.com.

• 0:08Speaker 00

  There's a trope in energy about the coal miner who goes down to work in the mines because his dad did it, and his dads did it before him, and so on. Jamie Daggett has a similar story, but for clean energy.

• 0:21Speaker 01

  My dad was a chemical engineer, environmental lawyer. His dad, so my grandpa, was a civil engineer. My mom's side, I had an uncle and aunt working in Los Alamos, at the National Labs, in fusion. And so I always kind of thought that I would get into some environmental path.

• 0:40Speaker 00

  So you were exposed to fusion at an early age, and National Labs, what were your dinner table conversations like?

• 0:46Speaker 01

  They were always really interesting. And at the time, it was just kind of normal. Actually, my uncle was one of these first thought leaders in fusion, trying to get the spherical target for fusion down to the nanometer of smoothness. And so when we were talking about that, it just felt like, here's what people do when they grow up.

• 1:08Speaker 00

  Jamie pursued mechanical engineering at Stanford, and he graduated in 2004, which was a really special moment for energy in Silicon Valley. Tesla had just built the Roadster prototype. Bloom Energy, then called Ion America, was adapting space-based fuel cells for buildings. And startups were adapting laptop batteries for the grid for the first time. Jamie was exposed to all of it.

• 1:29Speaker 01

  And it was a really exciting time for me. It motivated me to dive into the clean energy industry and get into startups, and fuel cells, electrolyzers, batteries. I spent about 12 years launching, testing products as a wrench-turning mechanical engineer at five different startups.

• 1:55Speaker 00

  So how does a mechanical engineer with that level of technical expertise get into insurance?

• 2:01Speaker 01

  Well, I was in Silicon Valley. You know, there was Googles and Apples. And so I thought, I'm going to start doing a startup company. I'll be one of the first ones there. About five startups later and three buyouts later, I realized the startup world in energy was much different than Google. It was more of a pay decline type of buyout rather than a million dollar buyout you see in the tech world.

• 2:29Speaker 00

  After years of ups and downs at five different companies, Jamie was looking to settle into something more stable. So he transitioned into independent engineering, writing bankability reports for leading battery suppliers.

• 2:40Speaker 01

  And so that role gave me a front row seat to the risks and opportunities around utility scale storage and also around the whole renewable ecosystem.

• 2:50Speaker 00

  And then out of the blue, Jamie got a message. It was from a senior person at the insurance provider, Ariel Green, who asked, have you ever considered insurance? He hadn't, but he looked into it. And he realized all those years inside risky startups and then assessing risk from the outside set him up perfectly for the role.

• 3:11Speaker 01

  And so, looking back, it actually made perfect sense that everything I'd learned in engineering and startups and channeling that same type of mentality into a new tool, which was insurance, to help accelerate the clean energy transition.

• 3:28Speaker 00

  I'm Stephen Lacey, and in this episode, produced in collaboration with Ariel Green, we explore the critical role of insurance in unlocking growth in energy storage and other clean resources. Renewables and batteries are now dominating new capacity additions, but the industry is still evolving its approach to risk. I sat down with Jamie Daggett, Ariel Green's Lead for Storage and Fuel Cells, to chat about where those risks are and strategies to manage them.

• 3:52Speaker 01

  You know, insurance is another tool that we can use to help grow the clean energy market. I do feel like it plays sort of a unsung role behind the scenes, enabling big changes.

• 4:13Speaker 00

  And so what were some of the risks? How would you categorize the risks that you see with the technologies you've been assessing?

• 4:21Speaker 01

  You know, you can kind of break down the risks into different categories. So as companies get their systems from the lab scale out into the field, you know, they're launching new products and things fail. There's a bathtub curve. In early risks, equipment might fail. There's software, there's hardware, there's, you know, mass defects of manufacturing because as new products roll out, things go wrong. So that's, that's more of the typical type of risk. And then there's also the, you know, more commercial type of risk. Many companies that are out there right now, or I would say most all companies, put warranties behind their product.

• 5:02Speaker 01

  So PV modules, for example, have all standardized on 25 or 30 year warranties. But most all of those companies have not been around for 25 or 30 years. Same thing with batteries. They're, they're guaranteeing their product for 15, maybe 20 years, although their product may be in the field for a maximum of three or five years. So the commercial side risk is they're guaranteeing something that they haven't proven commercially. And so there's a lot of liabilities that are out there if something goes wrong, either in the near term or in the long term. And we cover those types of risks at Ariel Green.

• 5:41Speaker 00

  So let's talk about a phrase that a lot of people in this industry know well, the valley of death. This is a very difficult space for many startups that are scaling to potentially commercial scale. Just can you talk about your experience in the valley of death? Why that phase is so difficult and where insurance comes in?

• 6:00Speaker 01

  When people talk about the valley of death, they're talking about that brutal gap between proving a technology works and actually getting it financed at scale. So on one side, you've got venture capital, private equity, government grants that are helping these startups get through the lab and early testing. And then on the other side, you've got project finance, the big banks that are waiting for proven bankable technologies. And right in the middle, that's where many clean energy companies stall out. So what insurance can do to help bridge that gap is focus on providing

• 6:41Speaker 01

  a credit-worthy backstop so that the performance guarantees that the company is making are now held by a high-credit-rated insurance company rather than a non-credit-worthy supplier. So in plain terms, a supplier will say, "Our systems will deliver this much energy for this many years." And investors and lenders don't just have to take their word for it. They can look at the backing from Lloyds of London, which is, you know, Ariel Green, where Lloyds of London Syndicate with the AA credit rating, standing behind that promise.

• 7:19Speaker 00

  And what are the types of technologies or companies you're seeing currently trying to cross this valley compared with maybe a decade or two ago from the beginning of your career?

• 7:30Speaker 01

  Great question. So there are more mature technologies. Let's call it PV modules have matured, you know, polycrystalline technologies are mature. There's lots of companies, and, you know, we insure many of those companies, but they're not trying to cross the Valley of Death. They're competing on price, driving down their margins. The ones that are trying to get across the Valley of Death are the new entrants. Think of the non-lithium battery suppliers, some of the long-duration battery suppliers, many of the bioconversion companies that are out there that have a newer technology that may not

• 8:11Speaker 01

  be proven. You know, there's a definition for first-of-a-kind, saying that they have systems that have been in the field at a "commercial" scale for six to 12 months, and, you know, they're trying to scale up. So those types of companies really are the ones that are at risk. Because many of the project financiers don't want to come in and invest big capital into a project like that. And so what we're trying to do is build the confidence that if their technology doesn't work, or even worse, if the company's no longer around, there will be an insurance backstop. And some of these larger investors will get some recourse if there's a failure.

• 8:54Speaker 00

  And you can look at insurance a couple of different ways. One is to see it as protection against failure. Another is to see it as a tool for really building confidence across the capital stack so that capital flows faster. How do you see it?

• 9:07Speaker 01

  It really is both. On one hand, insurance is about protection. Everyone's familiar with equipment replacement coverage, especially in battery storage, where new battery products and chemistries are constantly being rolled out. If a system fails early or degrades faster than expected, insurance can help recover those losses. That's the safety net piece. But just as important, and maybe even more important, is the confidence it builds. So for lenders and investors, the insurance isn't just protection, it's an enabler. So most clean energy suppliers and project companies also don't have a credit rating. So that makes it hard for capital to flow.

• 9:49Speaker 01

  So stepping in as a backstop on those projects or for those project developers, insurance effectively lends its own creditworthiness to the project so that it builds confidence. In our case at Ariel Green, it means the weight of Lloyd's and the AA rating standing behind the project.

• 10:10Speaker 00

  So can you tell me a little bit more detail about the different insurance policies that you offer? And how much of that is actually customized based upon customer needs?

• 10:20Speaker 01

  So that is a good question. Our two main types of products, our insurance products are, one, for the suppliers. We backstop the supplier warranties. And the suppliers benefit from those if their equipment fails and they need to replace that equipment. And the buyer benefits in the case that the worst case scenario happens and that supplier goes out of business. This happened this year with Powen and we've been insuring Powen Systems and so as soon as they filed their Chapter 11, you know, the buyers reached out and said, you know, what happens now and our insurance policies worked exactly like they were supposed to

• 11:04Speaker 01

  and continued coverage. And now the buyers can come directly in place, a claim directly on the insurance policy as the named beneficiary. So Product 1 is really meant for the suppliers and then Product 2 is meant for the buyers at the project level with the main beneficiary being the banks. You know, they're looking to maintain revenue at their project and if there's some shortfall in production, if the system's down for extended periods, that project is not going to be making the expected revenue and they won't be able to pay back their debts and maintain their debt service. So those are really the two types of products we offer.

• 11:41Speaker 00

  So let's talk about some specific examples. Earlier this year, as you mentioned, Powen, a large storage integrator, went bankrupt. It happened in a very fast period of time. I know some of those projects in their portfolio had Ariel Green Insurance, so what happened to the projects that did have insurance and how did the outcome differ from those that didn't?

• 12:03Speaker 01

  You know, Powen is a fascinating example and it hit close to home for me as I'm based in Portland, Oregon, right down the road from their headquarters. What makes this story stand out is how quickly things unraveled for Powen. So they received a 200 million or so capital injection from KKR, one of the biggest names in private equity as a backer, and then only a few months later, they filed Chapter 11. So what happened, it's still an open question, but in my view, it came down to mismanagement at Powen. They were chasing short-term growth and profits without putting enough emphasis on long-term risk management.

• 12:45Speaker 01

  You know, they, Powen pointed to tariffs on Chinese cells as a factor because they were using Chinese cells and importing those cells and I'm sure that that pressure was real, but other US integrators like Tesla and Fluence face a similar supply chain realities and have managed to stay afloat. So clearly there was some deeper structural issue with Powen. But this case with Powen underscores an important truth that being a battery supplier is a brutally tough business. You know, margins are thin, technology is evolving fast, there's lots of competition and risk, whether technical, financial, operational, and that's exactly where insurance can help

• 13:30Speaker 01

  blunt this impact. So, you know, the question you asked about coverage of the Powen projects versus those that weren't covered, we did have Powen coverage in place. A good example is one with Invenergy, one of the largest US developers of wind, solar, and storage. You know, they were developing a project in Mexico, they required Powen to carry performance insurance from Ariel Green, which we had in place, and Invenergy was the named beneficiary on this policy. So when Powen went bankrupt, Invenergy didn't lose their safety net, and they can now file claims directly on, you know, if equipment fails or underperforms.

• 14:12Speaker 01

  And you can compare that to project owners who didn't have that coverage, and they're the ones who are now calling us to see if they can get coverage in place. There have been others who are participating and trying to fix in the aftermath, like FlexGen, who stepped in, they purchased many of the rights to service many of the Powen portfolio, but they're not covering the warranties. And so this leaves project owners exposed, and it's exactly where Ariel Green comes in, because we're working with those project owners to design insurance solutions that can step in where the warranty's left off.

• 14:48Speaker 00

  So what is the status quo, then, that creates a level of risk?

• 14:54Speaker 01

  The status quo is for buyers to identify their risk tolerance and then work with the supplier on defining their warranty. So they purchase standard warranties from the battery suppliers, and then, in most cases, will pay the supplier for extended warranty fees to extend that warranty out.

• 15:17Speaker 01

  In some cases, the buyers manage their own risk and don't buy the extended warranty. In other cases, they purchase performance insurance from us as a replacement for the extended warranties. But in the status quo, much of this risk has been put onto the supplier. And from our experience, you know, the first thing you learn being in insurance and as an insurance company is that many companies go out of business. They come and they go. We've been insuring PV module manufacturers for nearly 15 years. And if you look back a decade, fewer than 20% of the leading solar suppliers from that time are still around today.

• 16:00Speaker 01

  And we expect to see something similar in the battery storage and other clean technologies. So that's why we don't focus just on the supplier name. Our diligence is centered on the technology itself. Does it work? Will it last 10 to 15 or even 25 years? Because the hard truth is, a supplier may not be around for the life of the project. So, you know, what we do and what we provide as insurance providers is give the project owners and investors confidence that even if the supplier disappears, there's still a safety net. It might mean a cash payout, or it might even mean covering the cost to replace equipment from a new supplier down the road.

• 16:42Speaker 01

  But either way, insurance helps the projects, you know, build that confidence. So it doesn't grind to a halt just because a once leading company has failed to endure or had to file Chapter 11.

• 16:54Speaker 00

  I'd like to hear your thoughts on the Moss Landing fire and what that fire told us about the technology and safety risks in storage.

• 17:03Speaker 01

  Moss Landing fire was a real wake-up call for the industry. It showed us that no uncertain terms that fire risk is real. You know, the event resulted in about $400 million in insurance losses and thankfully, no one was hurt. But that was a striking event where the project was built to fire codes of the time and it still burned to the ground.

• 17:28Speaker 01

  So since then, we've seen some big improvements. For one, system design has changed. Instead of housing huge banks of batteries in a single warehouse, new projects are often containerized. They have set spacing requirements. All of those, you know, and even improved fire safety mechanisms inside the containers with no access to, uh, humans can't access the internals. Um, all these are, are big safety improvements. You know, on the technology side, the industry has been moving away from NMC chemistry, which was the type of, of battery chemistry, lithium ion battery chemistry used at Moss Landing, towards LFP chemistry, which has a lower fire risk of thermal runaway.

• 18:10Speaker 01

  And finally, NFPA, you know, actually just announced today, they have these new guidelines and codes, which is the National Fire Protection Agency, uh, 2026. It provides better guidance on full-scale fire testing and UL 95440A compliance for both fires and explosive gases that will hopefully be adopted broadly. So, good news is battery safety has advanced significantly, but the challenge is scale. With so many more projects being built today, even rare events and fight like fires or explosions will still continue to happen, but each one pushes the industry to raise the bar a little higher on safety.

• 18:54Speaker 00

  And so I guess the other set of risks are policy risks. We're seeing massive changes in our trade policy with tariffs, um, foreign entity of concern rules. Uh, then we're also seeing, you know, tax credit changes. How do you factor those risks into thinking about insurance policies?

• 19:14Speaker 01

  Tariffs, FIAC rules, tax credit changes. There's no question. They've all added friction to the storage market this year and the renewables market more generally. We've seen delays, higher costs, definitely uncertainty in the market. But at the same time, this industry is no stranger to policy whiplash um, over the past few decades. Clean energy has weathered lots of shifts in policy, some setbacks, some tailwinds. And the market has continued to grow. So that's the perspective we try to take at Ariel Green. You know, battery projects are designed to last 20 years or more, which means there'll be multiple administrations, new rules,

• 19:57Speaker 01

  plenty of ups and downs along the way. And our job is to help protect the owners and investors for this long horizon. So insurance is meant to provide that layer of stability, even when policy environment gets bumpy and challenges, you know, come up. It's meant to provide that safety net and keep capital flowing and projects moving forward.

• 20:20Speaker 00

  We're seeing a lot of action right now in the long duration storage space and those various technologies and eight hour plus storage present some unique technical and financial risks. What are they? How do you think about insuring them?

• 20:36Speaker 01

  Long duration storage is one of the most exciting frontiers right now, and it's not just hype. We're already seeing traction. For example, Ariel Green has been insuring all of EOS' deployments since the start of this year. We've been actively supporting projects as they scale. I also have a personal connection to the space. I worked at E S S here in Portland. It's a flow battery startup. And from the insurance side, what we want to see is proof of operation at commercial scale, typically six to 12 months before we provide coverage. So that's a real challenge in long duration because only a few markets like the UK cap and floor program

• 21:18Speaker 01

  are really even incentivizing these longer duration projects. So as more deployments come online, we'll be watching many of these companies like Form Energy, Invinity, other flow battery companies. And I think it's only a matter of time before we're insuring more of these long duration technologies as they move from the pilot scale to the commercial scale.

• 21:40Speaker 00

  How long do you think the timelines are for seeing more commercial operation?

• 21:44Speaker 01

  Well, the exciting part is, and we have already engaged with many of these companies, but the exciting part is it's happening right now. Some of the very first larger scale deployments are getting announced. So the buyers are just starting to purchase some of their equipment. They haven't got manufactured and put in the field yet, but I would say within the next year or two, some of the first, you know, 100 megawatt hour plus. And in long duration, the megawatt hours grow much quicker because if it's eight or 12 hours and, you know, say a 50 megawatt system times eight, you already have a 400 megawatt

• 22:24Speaker 01

  hour system, you know, a 400 megawatt hour system could be a huge project for a new long duration company. So I'd say by 2026, 2027, we'll, we'll see some of these larger scale, long duration projects just coming online and we'll definitely be watching and likely involved in some of those.

• 22:45Speaker 00

  Are there any other tech trends in storage that you're keeping your eye on right now?

• 22:49Speaker 01

  Uh, we, we keep our eye on everything. So, um, you know, sodium ion is a buzzword. You know, we see sodium ion playing a part and we're already interested in, in seeing how that that's going to participate. I think that could potentially be a replacement in the, in the nearer term even. You know, there's super capacitors that are competing and in some cases might have very large projects. And so, you know, we've been in discussions and excited about that technology. And then other non lithium type technologies. So there's thermal storage, you know, I, I have worked in the past at, at different startup companies that are exploring non lithium.

• 23:33Speaker 01

  And so, um, yeah, we're excited to see as they grow and, and keeping an eye on all those types.

• 23:38Speaker 00

  And so the industry has matured drastically over the last decade or two. Are, have companies matured in their? And gotten smarter about how they think about risk?

• 23:49Speaker 01

  Absolutely. I used to, you know, even two, two, three years ago, I would typically be interacting most with engineering leads as they evaluate their risk or even, you know, C-suite CEOs who are trying to take a holistic view. And within the last year or two, you know, the counterparts that I interact with at some of the suppliers and project developers have titles like VP of Risk or VP of Insurance and Risk, which I think goes to show that they're now focusing on long-term risk planning and hiring in experts in-house so that they can get the right insurance in place and they can manage their risks and understand,

• 24:32Speaker 01

  you know, having that internal understanding makes it much easier to communicate and build a program that works for the long term. So the short answer is yes. It feels like in some ways, the, you know, energy storage market is growing up because they're starting to plan for the future rather than just fighting to stay alive.

• 24:53Speaker 00

  When you started working on batteries and fuel cells and electrolyzers, like, did you imagine the scale the industry is at today?

• 25:02Speaker 01

  Yeah, back then, you know, thinking back to the, the two Tesla Roadsters sitting in a lab that I went and saw, you know, I thought this could be really cool. I hope people start driving more electric vehicles, but it just felt like a cool idea. It was all about finding something that seemed like a cool idea. And I had no idea if it was going to take off or not. I got excited about fuel cells and electrolyzers in the early 2000s. It seemed like the big thing at the time. But what actually happened was solar and then batteries actually took off much quicker than fuel cells did. And so I pivoted towards energy storage. So I'm, you know, I see things growing in a way that I hadn't

• 25:45Speaker 01

  expected, but I'm sure 10 years from now, we'll look back and think we were just in early days of clean energy because it'll turn into just energy. It's not clean energy anymore. It'll just be how things are done.

• 25:58Speaker 00

  Well, Jamie, you have convinced me to pay far closer attention to the insurance market. Jamie Daggett, thank you so much.

• 26:04Speaker 01

  Thanks, Stephen. It's been great.

• 26:08Speaker 00

  Jamie Daggett is the Energy Storage and Fuel Cell Lead Advisor at Ariel Green. This episode was produced in collaboration with Ariel Green, which helps clients reduce uncertainty by providing investment stability for clean energy projects, protecting the technologies that protect the environment. Through expertise from advisors like Jamie, the firm underwrites projects and unlocks affordable capital so that companies can scale. If you want to learn more about Ariel Green's insurance policies backed by Lloyds of London, go to arielgreen.com or click the link in the show notes.